Kumtor Kyrgyzstan Centerra Gold

As it decides the future of the Kumtor gold mine, Kyrgyzstan turns a blind eye to the present

After the Kyrgyz government imposed external management to the Canadian-operated Kumtor gold mine in May 2021, little is known about the current state of its activities and its future. While gold sales and exports are at a complete standstill, the Kyrgyz judicial authorities have been particularly busy investigating, interrogating, and/or arresting a flurry of major political figures of the past 30 years for Kumtor-related corruption, including four of the six post-independence presidents. 

The fight between Kyrgyz authorities and Centerra Gold continue over the Kumtor.  The largest gold mine in Kyrgyzstan, which accounted for 12.5% of the country’s gross domestic product (GDP) in 2020, has not sold gold since May 2021. On that date, Kyrgyz authorities have imposed an external management on the mine, officially controlled by Canadian firm Centerra Gold.

On October 2nd, 2021, Kyrgyz President Sadyr Japarov confirmed on Facebook that its country can’t sell gold, but “buyers are queuing”, reports Radio Azattyk, the Kyrgyz branch of US media Radio Free Europe. In a Facebook post on September 22, 2021, MP Natalya Nikitenko noted that the location of the 4 tons of gold produced since the Kyrgyz authorities took over control of the mine in May 2021 is unknown.

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The same day, MPs called on Tengiz Bolturuk, the mine’s temporary external manager, to release information about the state of operations at Kumtor. Kumtor Gold Company (KGC), the Kyrgyz subsidiary of the Canadian company exploiting the mine, Centerra, has stopped producing quarterly reports and now only issues vague statements.

Kyrgyzstan can’t sell gold on international markets

Finance and Economy minister Akylbek Japarov has confirmed that the extracted gold is still in the country, untouched, as reported by Radio Azattyk. It is likely to remain there for the foreseeable future: Kyrgyzaltyn, the state-owned company through which Kyrgyzstan holds a 26% stake in Centerra, has been temporary excluded from the London Bullion Market Association’s Good Delivery List on September 17, 2021. After this decision, all access to the international gold trading market has essentially been cut off.

Plans were announced in late May for the National Bank to purchase the gold to circumvent exporting difficulties, but the press service of the Economy and Finance ministry confirmed to Radio Azattyk that no such agreement had been made. A negociation round between Centerra and Kyrgyz authorities has been held in Geneva from September 28 to 30, but it wasn’t conclusive, reports Radio Azattyk.

Unclear present, uncertain future

Although external management was appointed on a temporary basis, originally for a period of three months, the country seems to be moving towards outright nationalization, at least for the moment. On July 8, the head of the National Security Committee (GKNB) Kamshybek Tashiev, announced that the institution had initiated the denunciation of the agreements signed between Centerra and Kyrgyzstan since 2009, as reported by independent Kyrgyz media Kloop. Kamshybek Tashiev is president Sadyr Japarov’s long-time ally and right-hand man.

On September 21, the Kyrgyz parliament also revoked the 2019 decree on the use of the profits generated by Kumtor for Kyrgyzstan, which had created two state funds dedicated to the development of the regions and environmental protection, to which Centerra has so far transferred 67 million dollars. According to Kyrgyz press agency 24.kg, not a single environmental project was financed, and most of the money was transferred to the state budget.

The Kyrgyz government’s plans for the Kumtor profits remain vague. Sadyr Japarov announced in June 2021 his intention to create a fund for the development of the Naryn oblast and finance the construction of a road from Balykchy to Barskoon in the Issyk Kul oblast. The works have already begun, but KGC’s press service has only released hazy information about minor activities for the development of the regions, without disclosing any numbers.

Meanwhile, Centerra has launched a legal offensive against Kyrgyzstan and Tengiz Bolturuk, accusing the latter, who was previously on its board, of colluding with the Kyrgyz authorities to orchestrate the takeover of the mine. Alongside international arbitration, proceedings at a New York bankruptcy court are ongoing to prevent the Kyrgyz side from accessing KGC’s assets and collect damages for Centerra, as explained by Kloop.

While the current situation appears to stagnate and the mine’s future remains uncertain, the Kyrgyz authorities have been particularly active on another front: prosecuting the main players of the mine’s 30-year history, one that the Economy and Finance minister has dubbed a “national humiliation.

The political elite of the past 30 years in the dock

While Kumtor isn’t selling any gold, former Kyrgyz politicians are targeted by the administration.On September 16, 2021, Kyrgyz authorities arrested former prime minister Dzhoomart Otorbayev, who held office between 2014 and 2015. Although the details of the accusations are not yet known, Radio Azattyk reveals that it is connected to the introduction of changes to the Water Code in 2014, which allowed KGC to extend its activities to the neighboring glaciers.

Djoomart Otorbayev is the fourth ex-prime minister to be arrested in the context of a large-scale investigation on corruption around Kumtor. Numerous other political figures, from ex-vice-prime ministers to current and former MPs and heads of state institutions, have also been arrested and/or interrogated.

Ex-President Sooronbai Jeenbekov, who resigned after the events of October 2020, was heard twice as a witness by the GKNB, on August 12 and September 18, regarding his role in the conclusion of agreements with Centerra as prime minister and then president of Kyrgyzstan, according to Kyrgyz media Kaktusmedia. In July 2021, Askar Akayev (1991-2005) and Kurmanbek Bakiyev (2005-2010), the country’s first and second presidents, in exile since their ousting from office by revolutions in 2005 and 2010, respectively, were put on the GKNB’s wanted list. Unexpectedly, Askar Akayev traveled to Kyrgyzstan in August to be heard by the GKNB, as reported by the BBC. Meanwhile, the role of Almazbek Atambayev, the fourth president of independent Kyrgyzstan, who has been in prison since 2019, is also being investigated by the authorities.

The large-scale investigation, launched in May by the Prosecutor General, covers the conclusion of agreements between Kyrgyzstan and the Canadian company Centerra (previously Cameco) between 1992 and 2019. With a big swath of the political players of the past 30 years and four of President Sadyr Japarov’s predecessors targeted, it is effectively the history of the country since independence that is on trial.

A post-independence story written in gold

On a larger scale, a total of 13 agreements and revisions have been concluded since 1992 for the exploitation of the mine, and it is no coincidence that the issue of Kumtor pops up on the political agenda with every change in power. Speaking to Novastan, Beril Ocakli, a researcher at the Humboldt University in Berlin finalizing her Ph.D. on the making and unmaking of Kyrgyzstan’s gold rush, points out that “gold mining generally and Kumtor specifically have written the post-independence history. An understanding of how a gold mine has become the fault line that Kumtor is today is intimately situated in the history of transition from a socialist Kyrgyz Republic to an independent Kyrgyzstan”.

The gold deposit, which was discovered in 1978 but never exploited during the Soviet era, held the promise of valuable revenues for the development of a newly independent Kyrgyzstan. But, as Beril Ocakli explains, the radical liberalization of the economy in an institutional vacuum led to the reckless expansion of mining via licensing, with little transparency over the negotiations between the Kyrgyz state and the companies seeking licenses.

Kumtor was born in this context, while Kyrgyzstan’s first president, Askar Akayev, accumulated significant wealth and steadily turned the new state into a “family business”. The choice of Canadian company Cameco to exploit the mine and the first restructuring deal under the newly created Centerra in 2003 are largely thought to have been driven by the Akayevs’ interests, as detailed by American news site The Diplomat. By 2004, Kyrgyzstan’s stake in the project had fallen from 67% to just 15.66%.

Discontent over gold mining fueled the anger that kicked Askar Akayev out of office in 2005, but Kurmbanbek Bakiyev’s subsequent presidency was marred by even greater systemic corruption and shady dealings. Although the negotiation of a new agreement in 2009 restored Kyrgyzstan’s shares to 33%, it required the company to pay only 14% of its gross revenue to the Kyrgyz state, sparking anger.

In the aftermath of the 2010 revolution, anti-gold activism, which had emerged after a Kumtor truck spilled sodium cyanide into the Barskoon river in 1998, poisoning the water supply of local residents, grew stronger and louder. The focus shifted from demands for compensation to calls for nationalization or outright mining bans, giving rise to conflicts at and around gold mines all over the country. Kumtor was the site of several of these, most notably in 2013, when Sadyr Japarov organized a protest in favor of nationalization that devolved into the kidnapping of a local governor, earning the future president a stint in prison.

Read more: Rise and fall… and rise: the career of Kyrgyzstan’s Sadyr Japarov

In reaction, the state has introduced a series of corporate social responsibility measures for license-holders in quest of a ‘social license to operate’ on top of their legal mining licenses”, explains Beril Ocakli. “According to the official discourse, the aim has been to increase the participation of the affected communities and move towards a more just distribution of the benefits accruing from gold mining. In practice, however, we see on the ground that in the best case, these initiatives are geared towards constructing consent and silencing opposition to gold mining; at worst, they continue to serve the state’s extractive order, to which the scandals around the regularly plundered Issyk-Kul development funds attest”, details the reseacher. The result of this history is endemic corruption in the sector and the state apparatus, a lack of cooperation between national actors, and a climate of institutional distrust.

Everything must change… so that everything can stay the same?

The new authorities are clearly positioning themselves as the righteous men who will do away with the errors of the past. The minister of Economy and Finance, Akylbek Japarov, whose words are reported by Kaktusmedia, has praised his own camp for taking action: “the new government found the strength to put an end to this. […] Active participants, including the president, put their reputation, their political future on the line, but I believe that history and the future generations will justify us no matter the outcome.” Not all buy into this rhetoric, however. In an extraordinary parliamentary session on May 17, 2021, MP Ryskeldi Mombekov confronted his colleagues: “Why are we only taking on what happened until October 2020? Is everyone before that date a traitor? […] If you call them traitors—Akayev, Bakiyev, Atambayev, Jeenbekov—then half of those who are sitting here are also traitors, because we all served under them.

This includes President Japarov, who was part and parcel of the system he now denounces, as an ally of former president and kleptocrat Kurmanbek Bakiyev and the head of his National Agency for the Prevention of Corruption. Although calls for nationalization and conflicts around Kumtor have been the cornerstone of his career post-Bakiyev, by the time of his appointment as prime minister in October 2020, Sadyr Japarov had changed his tune.

As reported by Radio Azattyk, the country’s new strongman declared that since little gold was left to extract from the mine, Centerra should simply finish exploiting it and carry out the reclamation process. However, on February 24, 2021, the Canadian company reported a 107% increase in the known reserves of the mine, extending its activities by another five years, to 2031. By May 7, in a series of events detailed by US media Eurasianet, the Kyrgyz parliament had adopted a law enabling the government to impose external management on KGC for alleged environmental and safety violations focused on the pollution of nearby glaciers.

Read more: Between nationalist populism and neoliberalism: Kyrgyzstan and global political trends

For Beril Ocakli, “the recent developments manifest the next attempt of co-optation and instrumentalization based on the ecological destruction driven by the Kumtor operations. It is good to see the incumbent government care about the nature and the future of the country, however, as MP Ryskeldi Mombekov uttered at the extraordinary Jogorku Kenesh session on May 17, history will indeed not forgive those who now blame the ecological destruction solely on the operating company. It takes two to tango.” As she points out in an interview with Voices on Central Asia, “building institutional trust will take a serious commitment to rule of law and sanctioning rule-breaking. And by that I do not mean populist promises; I mean taking citizens, their concerns and agency seriously and actually walking the walk.

Sadyr Japarov and his government’s populist tendencies, lack of transparency, aggressive stance against Centerra and focus on the prosecution of past leaders and rivals in their anti-corruption efforts may not signal such a commitment. Neither do President Japarov’s proposals to reform the mining sector via a revised Mining Code and local hiring quotas, which, according to Beril Ocakli, are hardly anything new. Kumtor has become a centerpiece of the new authorities’ policy, but, in the words of opposition figure Shirin Aitmatova, “What is the use of these anti-corruption, anti-kleptocratic detailed plans, programs and strategies, if their implementation is entrusted to the same ‘façade’ leaders under whom corruption flourishes in the hollow and impotent institutions entrusted to them?

Pia de Gouvello
Writer for Novastan in Bishkek

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